Organisation design is important as it encompasses the company’s organisation structure, culture, rewards system, and leadership - and there is more that can be done to meet competitive labour market needs, and address talent shortages.
With more than 90% of jobs categorised as 'service roles' - roles that require human ingenuity or empathy - analysts at the Josh Bersin Company revealed that employers need organisation models and structures that empower individuals, clarify what’s important, and assign responsibility in a way that works for cross-functional teams, projects, and solutions. In short, organisation design (OD) must excite and engage people, give them a sense of autonomy and ownership, and encourage continuous innovation and creativity.
On that note, the company released a report called the Definitive Guide to Organisation Design: The Journey to Agile, that encompasses information on why OD is a phenomenon employers should look at today, and how can they develop solutions around it to achieve higher and positive levels of business, people, and innovation outcomes.
Why is organisation design important?
According to the research, OD might be the most important consideration in business. This is because it encompasses a company’s organisation structure, culture, rewards system, and leadership - and there is more that can be done in that domain to meet competitive labour market needs, address talent shortages, and the likes. To this end, business leaders, HR executives, and consultants would require organisational models that can adapt, reward people quickly, and encourage people to stay, or models that are flexible enough to accommodate a transient workforce, which is defined as talents quitting and then coming back to an organisation/sector after a few years.
"Great organisation design is agile and accountable," the report cited. "It’s continuous and business-integrated; it creates clarity and productivity; and it encourages the growth of individuals and businesses. Agile and accountable organisations are not just more adaptable to change—they are more profitable, their customers are more satisfied, they deliver higher employee engagement and retention, and they encourage innovation."
What should OD look like?
An organisation design framework, according to the analysts, should encompass five key factors: business model, operating model, work, job, and organisation structure.
The 'business model' factor, for instance, should touch on the purpose & business strategy (i.e., a company's mission, vision, and purpose), the talent strategy (i.e., the people and workforce approaches required to support the business strategy), as well as culture & leadership (i.e., cultural constructs and leadership models that enable strategies to be successful).
The 'operating model' factor, on the other hand, should cover customer orientation (i.e., determining who the customers are, what success looks like, and how to operate for optimal customer outcomes), role definition (i.e., defining high-level roles for the model), and governance and metrics (i.e., deciding what success measures flow horizontally versus vertically and what the high-level accountabilities are).
The other three factors entail the following areas:
- 'Work design' - Work composition and technology to account for what people and teams will do to drive success, as well as the role of technology in automating, augmenting, and transforming the organisation. It also includes accountabilities and rewards to determine what the accountable party will do to accomplish outcomes and how they will be rewarded, and finally, the skills and experience to determine what skills and capabilities are required to accomplish outcomes and how to create a great employee experience through designing work right.
- 'Job design' - Job architecture to decide how to organise individual roles and jobs as well as the architecture of job families, functions, and jobs; workforce planning to create strategic and tactical plans for required jobs, skills, and capabilities; and flexible role design to build flexibility into the design of jobs to account for change.
- 'Organisation structure design' - Team based structures to organise teams and functions for success; agile models to build agility into approaches and hierarchies to prepare for the future, and flexible organisation structure to incorporate flexibility to make the organisation adaptable.
What does strong OD bring to the table?
#1 Better organisation design, better outcomes
Companies that work through these complex topics with HR capabilities and data to constantly realign their business are, the findings revealed, more than twice as likely to have outstanding financial performance, almost four times as likely to delight their customers, 13 times more likely to innovate effectively, and 27 times more likely to engage and retain employees. Operational outcomes will too improve significantly.
#2 Stronger work design, more outcomes achieved
Companies that understand the needs and expectations of their stakeholders, employees, and customers, as well as the culture and its impact on organisation design, are:
- 1.9 times more likely to accomplish outstanding business outcomes;
- 6.5 times more likely to accomplish exceptional workforce outcomes; and
- 6.6 times more likely to innovate and adapt well to change.
#3 Democratises access to career and professional opportunities beyond hierarchies
This is possible because with organisation design the role of a work manager vs a people manager becomes more defined at the workplace.
The work manager's role can be seen as one who:
- Is designated by the flow of work;
- Is accountable for deliverables and milestones;
- Manages projects and timelines;
- Is often dynamic and changing based on project needs;
- Manages cross-functional work teams;
- Works with squads (a small unit of people usually between six and 12 working together on a long-term mission) and tribes (a group of squads working in related fields with no more than 100 members);
- Is represented by a project structure, and
- Needs strong project management skills.
Meanwhile, the people manager's role can be seen as one who:
- Is designated by functional hierarchies;
- Is accountable for career and skills development;
- Leads, inspires, and coaches in functional areas;
- Is mostly stable and enduring based on function;
- Leads functional expertise;
- Works with chapters (a collection of people who share a similar skills set and work in the same tribe) and guilds (a wider community of people who share the same interest);
- Is represented by an organisation chart, and
- Needs strong people leadership skills.
#4 Better employee experience, better work performance
Companies that incorporate employee experience considerations into work design are:
- 5.8 times more likely to be financially high performing;
- 20 times more likely to delight customers, and
- 16 times more likely to be seen as a great place to work.
#5 Makes success sustainable
This is possible because with organisation design, it creates a sense of accountability in the workforce in relation to business, people, and innovation outcomes. "If it is not clear who’s accountable for a specific outcome, chances are it won’t be achieved," analysts explained.
Where do we start?
For those who are looking to improve organisation design, or implement one, analysts suggested they look at the following 15 practices:
- Clearly establish what the accountable party will do to drive success;
- Incorporate employee experience considerations in work design;
- Understand expectations of stakeholders, customers, and competitors;
- Reward and recognise people for accomplishing desired outcomes;
- Clearly understand the culture and its influence on organisation design;
- Consider the human impact of organisation design options;
- Deploy effective change management approaches to support adoption;
- Combine work activities that fit together into roles;
- Identify how to organise to deliver value;
- Use a flexible organisation structure that reflects the way work gets done;
- Transparently communicate the future state model and design;
- Define which capabilities to build internally versus to buy;
- Clearly define the roles needed in the target operating model;
- Clearly define work outcomes to be accomplished and measurements;
- Consider ease of implementation and practicality of organisation models.
Image / The Josh Bersin Company